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Okay, so you enjoy baking, and you've lost count of the number of times friends and family have suggested that you open your own bakery. But the idea of finding a building and then creating a business from scratch makes you rather nervous. Working out of your own kitchen, however, sounds like a great way to get started and you can easily measure the demand for your confectionery treats.

If figuring out where to start is a challenge, a business plan can help you hash out the details. The plan is a road map for your business that helps you identify the key areas that require the most focus.

Executive Summary Section

This is the first section of the business plan. Technically, it is written last. The executive summary is an overview of the information included in the plan. Once you have compiled all the information needed to write the other sections of the plan for your baking business, you can write this section.

However, it is better to wait until you've written the other before you complete this summary. As you are compiling your plan, you may need to tweak or revise other portions, so writing this last will save you time, and it will ensure the summary is as accurate as possible.

Overview of the Opportunity

This section describes the need you've identified and how your business intends to fill that need. For example, you've discovered that there isn't a baker in your area that specializes in birthday cakes, but there are three elementary schools, two middle schools and a daycare center in your town. Your business could offer decorated birthday cakes customized for each child.

Or, perhaps there isn't a bakery that specializes in gluten-free pastries and you want to fill that need. Determine the needs your area has and then describe how you intend to serve that need.

Market Analysis Summary

You need to address two areas in this summary section: potential customers and potential competitors. Your potential customers are people most likely to be interested in your baked goods. For instance, using the birthday cake example from above, your customers would be the parents of school-aged children who throw birthday parties. Your potential competitors are other bakeries in your vicinity.

These businesses may or may not offer birthday cakes, but because they are in the same business, you're both competing for the same clientele – those who consume baked goods. Finding out what each competitor offers not only helps you determine where the needs are but also helps you hone your menu, as well. For example, if there are already five bakeries offering doughnuts, you'll need to either create a kind of doughnut not being offered by the other bakeries, or choose another signature pastry.

Execution of the Business Plan

This is the bulk of your business plan. In this section, you'll explain your marketing plan, the logistics of day-to-day business operation and your sales plan. Your marketing and sales plans detail how you intend to reach your potential customers. For instance, your marketing plan covers things such as advertising ideas, social media outlets you plan to use, as well as other plans you need so that you can reach your target audience.

Your sales plan will explain price points for your items. The day-to-day logistics breaks down into categories, such as the equipment you need to operate your business; the licenses and regulations you're required to follow to operate a bakery from your home; and how you intend to track your operations to ensure that you are meeting your goals. It is important to note that food prepared in a home kitchen and intended for sale is heavily regulated in many areas of the country.

To be granted a license, the business owner may have to pass a food handlers' class and exam, install specific equipment such as a commercial oven and appliances and the kitchen may have to pass an inspection. All of these issues should be addressed in this section of the business plan.

Company and Management Summary

This section details who you and the other members of your management team are. This overview explains your business structure (sole proprietor, partnership, LLC – limited liability corporation, or corporation), and provides a bio for each key player of the business. You should also include information about how long your business has been in operation, in which states you are licensed to do business and if applicable, in which state your business is incorporated.

Financial Plan and Projections

These are your financial projections for the business. Typically, this includes a cash flow analysis, and a profit-and-loss summary for the first three to five years of the business. You'll also want to add a brief explanation that explains your rationale behind your projections. For the bakery, you could base your projections on the number of cakes you think you'll make each month, or on the income you think you'll earn in a given period.

You can also include your projected break-even analysis and your projected balance sheet. If you intend to seek financing for your bakery, include how much you are seeking in financing and how the money will be used – as this is important information that needs to be included in this section of the business plan.

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About the Author

K.A. Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since 2008. She taught Accounting, Management, Marketing and Business Law at WV Business College and Belmont College and holds a BA and an MAED in Education and Training.